House panel hears of fiscal cliff threats to Texas

Updated 10:57 pm, Tuesday, December 11, 2012

AUSTIN — Texas programs serving students, the needy and the unemployed could lose hundreds of millions of dollars a year if federal officials step off the fiscal cliff, budget experts said Tuesday, and defense spending could be cut by billions.

The committee heard Tuesday from budget analysts, state agencies and universities about the programs that would be affected by the failure to reach a deficit-reduction package, triggering automatic spending cuts and the expiration of Bush-era tax breaks.

"It's not just the cut to state funds, it's the compounding of those cuts," said Harper-Brown, citing tax increases and pointing to across-the-board reductions in spending as "putting thousands of Texas jobs at risk."

For most programs, the assumed reduction is 8.2 percent, though some programs have a lower cut, analysts said. The defense reduction is estimated at 9.4 percent, but the administration can exempt active-duty military.

Some programs are exempt, including Medicaid, Social Security and, to a large extent, Medicare.

68 programs listed

The Legislative Budget Board estimated a reduction of $251.4 million in federal funds for 68 programs related to the state budget in the 2013 fiscal year, and $1 billion for the next two-year budget period.

Hardest-hit would be funding for education for disadvantaged children; special education basic state grants; the Women, Infants and Children (WIC) nutrition program; and the child care and development block grant administered by the Texas Workforce Commission and Department of Family and Protective Services. Among other items potentially affected, the workforce agency could be forced to close some local centers and reduce employment services.

Rep. Dawnna Dukes, D-Austin, voiced concern that so many of the program cuts "are impacting women and children in a negative way."

The Legislative Budget Board also noted that federal funds are affected outside the state budget. They include higher education research grants, locally administered programs, including Head Start and community development grants; and defense procurement and grants.

Marcia Howard of the Federal Funds Information for States said Texas overall would likely see a $565 million reduction in funding compared with fiscal year 2012, including programs administered locally - a 7.3-percent reduction overall. The state still would see an overall increase in federal aid, largely due to Medicaid funding, she said.

Looking at defense-related spending including procurement, she said defense spending could be reduced by approximately $3 billion.

Rep. Mike Villarreal, a San Antonio Democrat who is vice chairman of the committee, said he is particularly concerned about the effect of automatic cuts on people who are jobless. He said the sequestration "comes at the worst possible time," as the country is pulling out of recession.

Villarreal said, however, "No matter what actually comes out of this, I think the citizens of the United States and the state of Texas can expect a drop in federal spending on military and domestic programs, and a rise in tax rates - even if they reach a deal.

"Because in the end, the larger problem that we are trying to solve is a national debt that is growing every year into the future at our current levels of federal spending and at the rate we raise taxes."

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